And why isn’t the amount the same at every community?
There are a few variables that determine that number.
What is the average security deposit for an apartment?
On average, the security deposit is equal to one month’s rent. So, you want to keep this number in mind when calculating how much money you’ll need to give your landlord at move-in. Many landlords require the security deposit and first month’s rent (and sometimes last month’s rent too) before they’ll give you keys.
Landlords set security deposits to protect them from damage and non-payment. Security deposits are set based on four important factors: State law, cost of monthly rent, included amenities (elevator, W/D in unit, private parking, furnished vs. unfurnished, doorman on site, new renovations) and market competition. When anticipating how much a security deposit might be, consider those factors when making an estimate. State law may limit how much a landlord can set a security deposit for, so it is always a good idea to check into your local legislation if you feel the security deposit set was too high.
Coming up with this amount of money may seem overwhelming. But, remember that if you’re in an apartment now, and you haven’t damaged it, you might a security deposit coming back to you. You should receive it within 30 days after you move out. (If you’ve earned its return, but you don’t receive it within 30 days, contact the office).
Where can I find the security deposit amount for a unit?
The amount owed for security deposit should be on the application, and must be on the lease. Before deciding on an apartment, make sure you have the dollar amount of the security deposit in writing.
See also: What you could need for the application process
How much can a landlord charge for a security deposit?
That’s up to the landlord. The average is one month’s rent, but some will charge up to three month’s rent. Most states have a limit to what can be charged, but there are some states that have no maximum.
If everyone else in the area is charging one month’s rent for security deposit, the landlord may want to do the same, to lease the unit. If you’ve seen evidence of that, take it with you in order to negotiate.
Why would a landlord charge more than one month rent for the security deposit?
Some property management companies have a policy that the deposit is 1.5 or two times the monthly rent. However, another reason your deposit may be quoted as higher is due to your less-than-perfect credit history. The landlord may want to rent to you but must offset the risk by charging you a higher security deposit.
Can my security deposit be used as rent?
Your security deposit is not meant to be used to pay your last month’s rent. When the time comes for you to move, you cannot ask your landlord to use your deposit to cover full or prorated rent. However, if you paid first and last month’s rent in lieu of – or in addition to – a security deposit, then you have, in fact, already paid for your last month, and shouldn’t be required to pay for your final month at the time, since you already did so up front.
Pet deposits
If your landlord allows your pet to move in, there will be an additional pet deposit due before the landlord gives you the keys. If your dog or cat is a service or therapy animal, the pet deposit should be waived with a doctor’s note. Bear in mind, you are still financially responsible for any damage your service or therapy animal does to the apartment.
Pet deposits are either refundable or non-refundable. If your landlord doesn’t charge a pet deposit, it may be because they charge monthly pet rent. This can be anywhere from $10 – $30 depending on the type of property and location. Some landlords will charge pet rent in addition to a security deposit, so make sure you ask about the pet charges up front.
When is the security deposit less than one month’s rent?
Some low-income tax credit properties have lower security deposits for those with good credit. In a market-rate complex, a lower security deposit might be offered to incentivize more people to move in.
Paying the security deposit and the first (and sometimes last) month’s rent can be tough, but it’s part of moving. Just remember, you do get your deposit back if you leave your unit in good condition when you move out. It’s part of the business. Once you get that part out of way you can focus on making your new apartment feel like home.
How do I get my security deposit back?
Getting a security deposit back can be difficult when dealing with some leasing companies. Here’s the best way to ensure you will get most – or all – of your security deposit back:
Take pictures and make notes during initial walk-through. Make sure you agree to everything that is listed on the walk-through sheet before you sign it.
Repair any and all damage that is your responsibility before you move out.
Read your lease carefully and make sure to follow all of the stipulations for moving out. This may include having carpets professionally cleaned and providing a receipt upon your move-out. Make sure you don’t miss these little, and often hidden, stipulations. It could end up costing you a lot more money in the end, as landlords often up-charge for these services if they have to do it themselves.
Follow your move-out process to a tee, including writing and delivering a proper Notice of Intent to Vacate.
Replace any broken blinds yourself.
Before filling any nail holes, make sure that your landlord intends to repaint after you leave. Landlords are supposed to do this, but some don’t. Those filled nail holes could cost you in the end.
Take pictures and document everything you do. Keep receipts to prove that you left your old place in tip-top shape, minus regular wear and tear.
Bekah Steenbock is a freelance writer with a background in real estate and business growth. She is a native Austinite, but has called Seattle, Mankato,
Milwaukee, Las Vegas and Atlanta home. Bekah, her husband and their three children love exploring the outdoors in their spare time.
Rent prices are on the rise, with the average cost increasing 18% between 2017 and 2022. But buying a home requires a hefty down payment and good credit. Renting to own your home can give you the best of both worlds, but there are some downsides.
If you’re thinking about signing a rent-to-own agreement, it’s important to weigh the pros/cons of rent-to-own home deals. Here’s what you need to know before you sign on the dotted line.
What are rent-to-own homes?
When you own a home, part of your monthly payments goes toward paying off the principal. If you stay in the home long enough, you’ll own it.
The same doesn’t apply to rentals. Your monthly rent solely covers your costs of living in that home, whether it’s a condo, apartment, townhouse, or single-family house.
A rent-to-own home lets you pay rent to live on the property, with the option to buy it when the lease runs out. In some cases, a portion of your rent goes toward the purchase price, but that isn’t always the case.
How does rent-to-own work?
A rent-to-own agreement is essentially a lease agreement with an option to buy. Rent-to-own contracts should be read thoroughly. Those options can vary from one contract to another.
When you sign a rent-to-own contract, you pay an upfront fee called an option fee. This is typically 1 to 5% of the home’s purchase price, and it’s non-refundable.
It’s important to note that a lease does not relieve you of the requirements to buy a house. You’ll still have to qualify for a mortgage and make a down payment. It’s merely a way to buy yourself some time and possibly put some of your rent toward the purchase price of a home.
Lease Option vs. Lease Purchase
Before you sign, pay close attention to the lease agreement you’re signing. There are two types, and one contractually obligates you to buy the property.
Lease Option Agreement
A lease option agreement is the best deal of the two for you, the buyer. You’re signing a lease option contract that merely gives you first rights to the house when the lease is up. If you change your mind, find a better deal, or can’t qualify for a mortgage, you can find somewhere else to live and move your belongings out.
Since the option fee is nonrefundable, it’s important to note that you will lose money if you choose not to buy. Calculate this loss when you’re deciding whether to buy.
Lease Purchase Agreement
Unlike a lease option agreement, lease purchase agreements obligate you to buy at the end of the lease. Since it’s a contract, that means you’re legally obligated to purchase the house.
This can be risky for a couple of reasons. Once you’re in the house, you may see issues you didn’t notice when you were first touring the house. Things could change with the neighborhood or your circumstances that you couldn’t know at the outset.
But the biggest issue with a lease purchase contract could simply be that you aren’t eligible for a mortgage to buy the house. Make sure you know, up front, what penalties or liabilities you’ll face if you can’t buy the house when your lease is up.
Even though both agreements operate differently on your end, they do obligate the seller to give you the option to buy when your lease expires. This puts you in a position to own a home at a predetermined future date, giving you the opportunity to start planning.
Length of a Rent-to-Own Agreement
Rent-to-own contracts start with a lease period that can be up to five years but is usually less than three. The thought is that the rental period will give a renter time to qualify for a mortgage. During this time, you’ll work on building your credit, if necessary, and saving for a down payment.
In some cases, a rent-to-own arrangement could have renewal terms. That means if you reach the end of the lease and want more time, you can extend the lease. With this option, though, the property owner could increase your monthly rent or the purchase price.
Preparing for Homebuying
During your lease term, you’ll make each monthly rent payment in exchange for remaining in the house. But it’s important during that time that you work toward purchasing the house when your time is up. Here are some things to do to boost your chances of landing a mortgage once your lease expires.
Boost Your Credit Score
Your rent-to-own deal requires that you qualify for a mortgage once the term is up. To do this, you will need to meet the minimum credit score requirements. You can get a free copy of your credit report each year at AnnualCreditReport.com, but there are also credit monitoring services that can help you stay on top of things.
Although requirements can vary from one lender to the next, Experian cites the following credit scores as necessary to land a mortgage:
FHA: If you qualify, a Federal Housing Association loan will accept credit scores as low as 500.
USDA loans: Those who meet the requirements can qualify with a score as low as 580.
Conventional loan: Generally 620 or higher, but some lenders require 660 at minimum.
VA loans: Eligible military community members and their families can obtain loans with scores as low as 620.
Jumbo loan: These loans cover houses at a higher price, so you’ll need a score of at least 700.
Save for a Down Payment
In addition to a good credit score, you’ll need to put some money down on your new home. Down payment requirements vary by loan type, but it’s recommended that you put at least 20% down. That means if you’re buying a $200,000 home, you’ll need at least $40,000 by closing.
There are lower down payment options, but if you choose those, your mortgage payments will include something called private mortgage insurance. This will increase your monthly payment by $30 to $70 per $100,000 borrowed.
If you can’t save up 20%, you may qualify for an FHA loan, which requires as little as 3.5% down. Both VA and USDA loans have zero down payment options, and there are programs offering down payment assistance to those who qualify.
The best part about rent-to-own properties, though, is that some come with rent credits. With a rent credit, a percentage of your rent will go toward your required down payment. Calculate in advance how much you’ll have in that escrow account at the end of your lease to make sure you save enough to supplement it.
What are the pros of rent-to-own?
Rent-to-own homes can be a great option, especially during a tight housing market. If there’s a house you want to buy, but you can’t make a down payment or your credit isn’t where it should be, it could be a great workaround. Here are some of the biggest benefits of rent-to-own agreements.
Rent May Go Toward Purchase Price
Depending on the terms of the rental agreement, renting to own could help you work toward paying for the home. Instead of the full amount of your rent being pocketed by a landlord, a percentage of your rent could go toward the eventual purchase price. Before signing, pay attention to rent credits and try to negotiate the best deal possible.
The Purchase Price Is Locked In
When a landlord agrees to a lease option, the home’s purchase price is written into the contract. That price will typically be higher than what the market says it’s currently worth. This means if the U.S. housing market sees an unexpected increase, you’ll be buying the home for less than its value. Even if the market dips, once you purchase the house and remain there for a few years, you may be able to sell it at a profit.
You’ll Buy Extra Time
For many renters, the rent-to-own period provides time to qualify for a mortgage. If you’ve researched all the options and found you’re close but not quite there yet, a rental period could be just what you need.
Before you choose this option, though, take a look at your circumstances. If substantial existing debt and poor credit mean you won’t qualify, you may need more than the few years you’ll get with a rent-to-own agreement.
No Moving Necessary
Let’s face it. Moving can be a pain. You have to pack everything up, line up a moving truck and get help moving, and unpack your items once you’re in the new location.
With a rent-to-own agreement in place, you skip the hassle of moving. You’ve already been in that home, making monthly rent payments, for at least a couple of years. You’ll simply go through the closing process and switch from rent payments to mortgage payments.
What are the cons of rent-to-own?
If you can get a mortgage, that’s always going to be a better option than renting or leasing to own. But there are some instances where renting without the buy option could be better for you. Here are some things to consider.
Rent-to-Own Home Maintenance
Before you sign any lease agreement, it’s important to read the fine print. One thing to note, specific to own agreements, is who will be responsible for maintenance during the rent-to-own period. If you rent without the promise of eventual ownership, your landlord will take care of those costs. In some cases, rent-to-own agreements require the renter to handle all repairs.
But there’s an upside to handling repairs on your own. To your landlord, the property is technically yours. That means you likely will give it more TLC. Still, it’s well worth it to pay for a home inspection before you agree to a rent-to-own agreement. This will identify any serious issues that will need to be addressed before you buy.
Option Fee
One distinguishing feature of a rent-to-own property is the option fee. This is usually between 1 and 5% of the purchase price and is non-refundable. That means if you don’t ultimately qualify for a mortgage, you’ll lose that money.
Home Values Could Drop
Property values aren’t guaranteed. Your landlord estimates the value of the property, but if you’re in a rising market, you might get that home at a steal. While that’s good news for you, the reverse can happen. If housing prices drop substantially during that time frame, you could find yourself buying a property for more than it’s worth.
Contract Breaches Can Be Costly
Rental agreements are a legal obligation. If you don’t pay your rent, your landlord can evict you and keep your security deposit. But rent-to-own contracts bring an additional level of risk. Missed payments mean you could be evicted and lose all the money you’ve put in. That includes the upfront fee and any rent credit you’ve earned.
All that money will also be lost if you can’t qualify for a mortgage when your rental time is up. These agreements can give you some breathing room. However, if your low credit scores, income, lack of a down payment, or employment situation make you ineligible for a mortgage, you could be searching for another rental while losing everything you’ve paid on the lease-to-own home.
Steps to Buy a Rent-to-Own Home
Once you’ve decided renting to own is the route you want to take, you may wonder what to do next. The following steps can help you ensure you get the best deal in a rent-to-own agreement.
1. Find a Home
This is more challenging than it might sound, especially if you’re looking in a competitive real estate market. Rent-to-own homes are extremely rare, so you may have to find a home for sale and try to negotiate this type of setup.
Typically, homeowners become renters when they can’t sell their homes. This means your rent-to-own contract might be on a home that’s in a less desirable or convenient area of town. For someone whose home has been on the market for a while, being able to collect rent money with the promise of a sale in a few years can be a huge relief.
For best results, find a real estate agent who can help you track down a home and negotiate with the seller. The National Association of REALTORS® maintains a directory of real estate agents, but you can also ask for a referral or find real estate agents nearby who have brokered these types of deals recently.
2. Research the Home
Even if it’s tough to find a lease-to-own home in your area, don’t snatch up the first one you find. Crunch the numbers to make sure the rent and purchase price make financial sense for you. Look at the sale history of the home to verify that the owner’s estimated purchase price is somewhat within what the median home price will likely be when your lease expires.
3. Research the Seller
The seller needs to be looked into as well. This is even more important with rent-to-own agreements since this person will be your landlord for the entire lease period. If you see any red flags during your interactions with the seller, move on.
4. Choose the Right Terms
Before you make a real estate purchase, you would have a closing attorney review the documents. The same goes for a rent-to-own agreement. Run all the paperwork past a real estate attorney to make sure there’s nothing in the contract that will hurt you in the long run.
Your real estate agent should be able to negotiate the best terms for you, including how each rent credit will help you build equity and what happens at the end of the lease.
5. Get a Property Inspection
Any time you make a home purchase, it’s essential to know what you’re buying. The same is true for rent-to-own properties. A home inspector can check things out and make sure you aren’t purchasing a home with serious issues.
6. Start Preparing to Buy
Once you start making rent payments, it’s time to start preparing for your eventual home purchase. Chances are, you’ll have to make a sizable down payment on a home loan, so plan to have that ready. Also, keep an eye on your score with all three credit bureaus and make sure you’ll qualify.
A rent-to-own contract can be a good deal for both the buyer and the seller. It can give you time to save money and improve your credit score. A real estate lawyer should take a look at your contracts and make sure your best interests are protected.
Bottom Line
Rent-to-own homes present a unique option for potential homeowners. This approach offers the opportunity to enter the homeownership arena at a slower pace, allowing individuals to build credit, save for a down payment, and experience living in the home before making a final purchase decision.
However, the rent-to-own path isn’t free from drawbacks. Potential buyers should be wary of unfavorable terms, higher monthly payments, and the risk of losing money if they decide not to buy. Ultimately, like all significant decisions in life, choosing a rent-to-own option requires careful consideration and thorough research.
Frequently Asked Questions
Where can I find rent-to-own houses?
Rent-to-own houses can be found through specialized websites dedicated to these types of listings, local real estate agents familiar with the concept, or sometimes through classified advertisements in local newspapers or online platforms.
Can I find rent-to-own homes on Zillow?
Yes, Zillow does list rent-to-own homes. When searching for properties, you can filter the search results to show only rent-to-own options. However, availability may vary based on the region and market conditions.
How long is the typical rent-to-own contract?
The typical lease term ranges from one to five years, but terms can vary based on the agreement between the homeowner and tenant.
Do I have to buy the house at the end of the lease?
No, the decision to buy is optional. However, if you decide not to purchase, you may lose any upfront fees or additional monthly amounts set aside for the potential purchase.
Can the seller change the purchase price once set?
Generally, the purchase price is fixed in the initial agreement. However, some contracts may have clauses allowing price adjustments based on market conditions.
What happens if the property value decreases during the lease period?
If the home’s value decreases and you’ve agreed on a set purchase price, you could end up paying more than the current market value. It’s crucial to negotiate terms that protect your interests.
Who is responsible for repairs and maintenance?
The agreement should clearly outline these responsibilities. In most cases, the tenant bears the responsibility for maintenance and repairs during the lease term.
What’s the benefit of a rent-to-own agreement for sellers?
Sellers can generate rental income while waiting to sell, often at a premium. It also widens the pool of potential buyers, especially those who need time to improve their credit or save for a down payment.
How do property taxes work in a rent-to-own agreement?
In a rent-to-own scenario, the property taxes are typically the responsibility of the homeowner, as they still retain ownership of the property during the rental period. However, the specific arrangement can vary based on the terms of the agreement.
Some contracts may stipulate that the tenant pays the property taxes directly or reimburses the homeowner. It’s crucial for both parties to clearly understand and agree upon who will cover the property tax obligation before entering into a rent-to-own contract.
If I don’t buy, do I get a refund for the extra money paid?
Typically, the extra money paid above regular rent, often referred to as “rent premium,” is forfeited if you decide not to buy.
Is the rent in a rent-to-own agreement higher than usual?
Often, yes. A portion of the monthly rent may be used for the potential down payment or purchase price, making it higher than the average rent for similar properties.
What’s the difference between rent-to-own and mortgage?
Rent-to-own is an agreement where a tenant rents a property with the option to buy it at the end of the lease. No bank is involved initially, and the tenant isn’t obligated to buy. A mortgage, on the other hand, is a loan specifically for purchasing a property. The buyer borrows money from a bank or lender and agrees to pay it back with interest over a predetermined period.
Does rent-to-own hurt your credit?
A rent-to-own agreement, in itself, doesn’t usually affect your credit. However, if the homeowner reports late payments to credit bureaus, it could hurt your credit score. On the positive side, consistently paying on time and eventually securing a mortgage can benefit your credit.
What is another name for rent-to-own?
Rent-to-own agreements can go by various names, including:
Lease to purchase
Lease option
Rent-to-buy
Rent-to-purchase option
Lease purchase
Each of these terms represents the concept of renting a property with the potential option to buy it after a set period.
Car subscriptions allow drivers to swap out their cars for a new one every few weeks or months (depending on the service), for a set monthly fee.
Buying a car can be a daunting process, especially as the auto market reels from a period of high prices, soaring interest rates and supply chain issues. Car subscriptions can be a flexible and convenient alternative to buying a car, depending on your needs and budget.
What are car subscriptions?
Car subscription services allow drivers access to new cars and other benefits, for a monthly fee.
Much like car leasing or renting, drivers don’t own the vehicle during the time of subscription or after. However, unlike traditional car leasing, which typically offers three-year contracts, car subscription services allow customers to change their car for a new one every month or every couple of weeks. Subscribers also get the flexibility to end their subscriptions after only a couple of months.
Car subscription services are offered by independent rental companies, automakers and dealers. Examples of automaker-backed subscription services include Care by Volvo and Porsche Drive. These programs operate via franchised dealer networks, but not all dealers offer them.
Independent companies like FINN offer subscriptions to a variety of automakers like Audi, Chevrolet, Jeep and Ram, and allow subscribers to swap out cars every six to 12 months. Similarly, the car rental service Hertz allows drivers to exchange cars up to twice a month, through the service Hertz My Car.
How do car subscriptions work?
To join a subscription service, you must meet the program’s insurance, credit and driving history requirements. If approved, you can go to a subscription center, which are typically franchised dealers, or download the company’s app to begin using their service.
Most car subscription services come with a one-time enrollment fee in addition to the monthly fee. Enrollment fees typically cost a few hundred dollars — Hertz My Car charges $250 while Porsche Drive charges $595 for a one-month membership or a multi-vehicle subscription, for example.
Monthly subscription costs also vary among services and even model type: The Care by Volvo monthly price starts at around $915 for a C40 Recharge Plus model and goes up to $1,100 for an XC90. Similarly, Hertz has three program tiers, the lowest of which costs $599 per month (plus taxes) for compact and mid-size sedans and the highest of which costs $1,399 per month (plus taxes) for SUVs, large trucks, luxury sedans and the like. Most subscription program monthly fees also include benefits like insurance coverage, maintenance, 24-hour roadside assistance and more. Many offer complimentary delivery and pickup as well.
The vehicles available to drive will depend on the inventory at your local franchised dealer. And when you subscribe through a third party company like Hertz, you may not get the model you pick if the car is not available.
When your term is over, you can choose to cancel your subscription or return the car for a new one. Note that most of these programs have monthly mileage caps — 1,250 for Care by Volvo, for example. If you go over your allotted miles per month, you won’t be able to purchase more, and will be charged a fee for each additional mile you drive.
Should I join a car subscription service?
Car subscriptions are flexible and convenient: There’s no down payment required, you’re not saddled with monthly payments nor locked into a long contract. However, there are some downsides to consider.
As with renting or leasing, subscribers don’t own the car they’re driving, which means their monthly fee payments don’t go toward having equity in the car. And these fees can be hundreds of dollars more costly than monthly leasing or finance payments. Additionally, because you don’t own the car, you’ll have to pay for any excess wear and tear at the end of your term, which can be costly depending on the damage.
Keep in mind that some third-party subscription services don’t operate in every state and have very limited coverage, which means not all drivers can use them.
Despite these constraints, car subscriptions can offer access to newer cars, electric cars and luxury car models if you have the budget and want to drive a new car every month or so. Plus, if you’re shopping for a specific make or model, a car subscription can be a good way to test drive a car for an extended period of time to see if you like it. But subscribing to a car service likely won’t make sense for the average driver.
Many people are lured into the world of real estate investing by stories of millionaires who started their journey with no money down or no steady employment. But the reality is that making money in real estate isn’t easy; a good credit score, investment capital and steady income can help in the beginning.
You’ll also need to grasp the nuances of the local real estate market and learn how to manage financial aspects such as cash flow and property taxes. While real estate buying, selling, and renting may not be much like a game of Monopoly, it is possible to earn steady side income, supplement your retirement, or even build a full-time real estate investment business with the right tools, knowledge, and patience.
Unlike mutual funds, the stock market, cryptocurrency or many other investments, real estate is tangible. Real estate is a concrete asset—one can see, touch, and even reside in. That gives investors a sense of security. However, it also creates unique challenges.
Managed well, the stability and passive income from rental properties can be a safety net against more volatile investments.
This guide is here to clarify the process for beginners. It aims to empower you to make informed decisions, reduce risks, and lay a strong foundation for your real estate investing journey.
Benefits of Investing in Real Estate
The allure of real estate goes beyond the mere ownership of tangible assets. It presents a robust suite of financial benefits that have the potential to amplify wealth and provide stability in uncertain times. As we navigate the advantages, it becomes evident why many seasoned investors prioritize real estate in their portfolios.
Steady and Passive Income
Real estate investing, especially in rental properties, stands out for its potential to provide a consistent revenue stream. When you own a rental property, the monthly or quarterly distributions from tenants contribute to steady income, which can safeguard your finances against unexpected events or economic downturns.
This consistency contrasts with the often erratic nature of the stock market, which can fluctuate daily based on global events, company performances, and other factors. Additionally, for those aiming to attain financial freedom, the passive income generated from real estate can be a step closer to achieving that goal. Over time, as the mortgage payment decreases or remains static, rental rates may rise, increasing your monthly cash flow.
Appreciation Potential
Every investor dreams of their assets appreciating, and real estate often doesn’t disappoint. While there can be periodic downturns in the real estate market, historical trends suggest that properties generally gain value over the long run.
This means that not only can investors benefit from rental income, but they can also potentially see substantial gains when they choose to sell the property.
Tax Benefits
Navigating the world of taxes can be intricate, but real estate investors often find several advantages here. The ability to deduct mortgage interest and property taxes from taxable income can be a significant financial boon.
Furthermore, strategies like depreciation allow real estate investors to offset rental income, reducing their tax burden. Consulting with a financial advisor can help investors maximize these benefits and understand other potential tax advantages, such as 1031 exchanges or deductions related to property management.
Diversification
The saying “don’t put all your eggs in one basket” is sound investment advice. Diversification is a fundamental strategy to mitigate risks. By adding real estate to an investment portfolio, investors introduce a separate asset class that doesn’t directly correlate with the stock market or mutual funds. This can provide a buffer, ensuring that a downturn in one sector doesn’t wholly derail an investor’s financial trajectory.
Leverage
Leverage, in the context of real estate investing, refers to the ability to use borrowed capital to increase the potential return on an investment. When you purchase property with a mortgage loan, you’re often putting down only a fraction of the property’s total cost, while still reaping the benefits of its entire value in terms of appreciation and rental income.
This magnifies the return on investment, as the gains and income generated are based on the property’s total value, not just the down payment. It’s a powerful tool but should be used wisely. Over-leveraging or not accounting for potential rental vacancies can turn leverage into a double-edged sword.
Types of Real Estate Investments
As one dives deeper into the world of real estate, it becomes evident that this asset class is multifaceted, with various avenues to explore and invest in. The right choice often depends on an investor’s goals, risk tolerance, budget, and expertise. Here’s a closer look at some prominent types of real estate investments:
Residential Properties
Residential properties cater to individuals or families. They range from single-family homes to duplexes, triplexes, high-rise buildings with apartments, and other multi-unit properties. You may encounter the term “MDU” or “MUD,” which stand for multi-dwelling unit or multi-unit dwelling, to describe anything more than a single family home, or SFR (single family real estate).
Investing in residential real estate, especially the SFR market, is often a beginner’s first step due to its familiarity and the perpetual demand for housing. While these properties can be a reliable source of rental income, investors should be prepared for the challenges tied to property management, tenant turnover, and ongoing maintenance.
Commercial Real Estate
When one thinks of skyscrapers lining city horizons or sprawling office parks in suburban locales, that’s commercial real estate. These properties are tailored to businesses, and can include complete corporate headquarters or individual offices.
Commercial leases often run longer than residential ones, offering the potential for stable, long-term rental income. However, the entry point can be higher, with larger down payments and a more extensive due diligence process. Additionally, commercial real estate values can be closely tied to the business environment of the locality.
Industrial
Industrial real estate encompasses properties like warehouses, distribution centers, and manufacturing facilities. They’re integral to business operations, ensuring products move efficiently from manufacturers to consumers.
Investing in this sector can offer substantial rental yields, especially if the property is strategically located near transportation hubs. However, the nuances of industrial real estate, such as zoning laws and environmental concerns, necessitate a more in-depth understanding than residential or commercial sectors.
Retail
This sector includes shopping malls, strip malls, and standalone stores. What’s unique about retail real estate is that leases sometimes include a provision where the landlord gets a percentage of the store’s profits, termed as “percentage rent.”
In a thriving commercial area, retail properties can be quite profitable, with long-term leases and the potential for appreciating property values. However, investors should be mindful of shifts in consumer behavior and the evolving retail landscape, especially with the rise of e-commerce.
Multi-Purpose Commercial
A new breed of commercial real estate has emerged to compete with the growth of e-commerce. Multi-purpose commercial spaces blend housing units with office space and retail, often adding hospitality and entertainment venues.
Typically, these spaces are the domain of large real estate investment and property management firms. But if you invest in commercial office space or retail, you will be competing with these multi-purpose properties for tenants, so they are worth acknowledging.
Real Estate Investment Trusts (REITs)
For those not keen on direct property ownership, REITs present an attractive alternative. These are companies that own, operate, or finance income-producing real estate across various sectors. What makes REITs distinctive is that they’re traded on stock exchanges, similar to stocks.
By investing in a REIT, you’re buying shares of a company that manages a portfolio of properties, thus gaining exposure to real estate without the hassles of property management. Moreover, by law, REITs are required to distribute at least 90% of their taxable income to shareholders, leading to potentially attractive dividend yields. However, it’s essential to remember that like all publicly traded entities, REITs can be subject to market volatility.
9 Ways to Invest in Real Estate
Investing in real estate can seem tricky for beginners. But, with time and patience, anyone can master it. Focus on simple investment methods first to get to know your local property scene, meet experienced investors, and learn how to handle money wisely. As you learn and grow, you can dive into more complex investment options.
Here are some great ways for beginners to start in real estate:
1. Wholesaling
Acting as the bridge between property sellers and eager buyers, this method primarily focuses on securing properties at a rate below the prevailing market value. The secured contract is then transferred to an interested buyer, ensuring a margin for the wholesaler.
2. Prehabbing
Unlike intensive property renovations, prehabbing is about amplifying a property’s appeal through minimalistic enhancements. These properties, once given their facelift, usually attract investors with a keen eye for larger renovation projects.
3. Purchasing Rental Properties
An avenue promising consistent returns, this involves acquiring properties to lease them out. For those not inclined towards the intricacies of landlord duties, there’s always the option of hiring seasoned property management professionals.
4. House Flipping
A strategy that has garnered significant attention, house flipping involves a cycle of purchasing, upgrading, and promptly reselling properties, aiming for a profit. The emphasis is on swift transactions and keen market acumen.
5. Real Estate Syndication
Envision a collective where like-minded investors come together, pooling both resources and expertise. Such collectives venture into large-scale property acquisitions, and the ensuing profits or rental incomes are distributed among the participants.
6. Real Estate Investment Groups (REIG)
Primarily, these are conglomerates that steer their operations around real estate investments. By amassing capital from a plethora of investors, they dive into acquisitions of sizeable multi-unit residences or commercial holdings.
7. Investing in REITs
Real Estate Investment Trusts (REITs) revolve around the ownership and meticulous management of properties that yield income. However, investors don’t have to handle the management themselves. Instead, participants can relish the benefits of the real estate sector without the responsibilities of direct property ownership.
8. Online Real Estate Platforms
A fusion of technology with real estate, these platforms seamlessly connect potential investors with vetted property developers. This synergy enables backers to finance promising property ventures and, in exchange, enjoy periodic returns that encompass interest.
9. House Hacking
A blend of homeownership and investment, house hacking is about maximizing the potential of a multi-unit property or a single-family home. Investors live in one segment while leasing out the remaining portions. This dual approach can significantly reduce or even negate monthly housing expenses, serving as an excellent introduction to the world of property management for novice investors.
6 Steps to Get Started in Real Estate Investing
Starting on the path of real estate investing requires careful planning, due diligence, and a methodical approach to ensure that your investments are sound and have the potential for fruitful returns. Whether you’re dreaming of becoming a millionaire real estate investor or merely looking to diversify your investment portfolio, following a structured process can be the key to success. Here’s a step-by-step breakdown:
1. Assess Your Financial Health
Every investment journey should begin with introspection. As an aspiring real estate investor, it’s essential to have a clear understanding of your current financial standing. Ask yourself questions like:
How much capital am I willing to invest?
What are my short-term and long-term financial goals?
Do I have an emergency fund set aside?
Evaluating your risk tolerance is equally crucial. Some might be comfortable flipping houses, while others might prefer the steadiness of rental properties. Consulting a financial advisor at this stage can provide insights tailored to your financial health, enabling you to make informed decisions as you proceed.
2. Dive Deep into Market Research
Knowledge is power in the world of real estate. The local market can be significantly different from national or even statewide trends. Delve deep into understanding:
The demand for rental properties in your target area.
The average property values and rental rates.
The historical appreciation rates.
Any upcoming infrastructure projects or urban development initiatives.
Furthermore, familiarize yourself with real estate terminology. Phrases like “cap rate,” “loan-to-value,” and “operating expenses” will become a regular part of your vocabulary. The better informed you are, the more confidently you can navigate your investments.
3. Assemble Your Real Estate Team
No investor is an island. Success in the real estate business often hinges on the strength and expertise of your team. Look for professionals with a proven track record and positive reviews. Your team might include:
Real estate agents who understand the investor’s perspective.
Property managers to streamline tenant interactions and maintenance.
Lawyers specializing in real estate transactions.
Accountants familiar with the tax implications of real estate investments.
4. Explore Financing Options
The path to acquiring a property is paved with various financing methods. Traditional mortgages are common, but the real estate industry offers other mechanisms like:
Hard money loans.
Private money loans.
Real estate syndication where multiple investors pool resources.
Seller financing.
Each of these has different pros and cons, interest rates, and repayment terms. Understand each deeply to determine which aligns best with your financial strategy.
5. Analyze Potential Properties
The crux of real estate investing is ensuring that the numbers make sense. Before purchasing, assess the property’s potential for generating rental income. Break down:
Monthly mortgage payments
Property taxes
Maintenance costs
Potential vacancy rates
Your goal should be a positive cash flow, where the monthly income from the property (rent) exceeds all these expenses.
6. Negotiate and Close the Deal
Once you’ve zeroed in on a property, the negotiation phase begins. Here, understanding the property’s market value, any existing damages or repair needs, and the local real estate market dynamics can give you an edge.
When it comes to closing, be aware of all associated costs. These might include inspection fees, title insurance, and escrow fees. Being well-informed can help you negotiate these fees and ensure that you’re not overpaying.
Risks and How to Mitigate Them
Like any investment, real estate comes with its set of challenges and uncertainties. The difference between successful real estate investors and those who falter is often the ability to anticipate risks and prepare for them. Here’s an exploration of some prevalent risks in real estate and actionable steps to manage them:
1. Market Fluctuations
Real estate markets can be volatile, with property values rising and falling based on a myriad of factors.
Mitigation: To protect against market downturns, it’s essential to buy properties below their market value. Conducting comprehensive research and seeking expert investment advice can help investors make informed decisions. Remember, real estate is often a long-term game, so a short-term dip can be offset by long-term appreciation.
2. Unexpected Repairs and Maintenance
Properties can often come with surprises, from plumbing issues to roof repairs.
Mitigation: Regular property inspections can catch potential problems before they become major expenses. Setting aside a buffer fund specifically for maintenance can also cushion the financial blow of unforeseen repairs.
3. Vacancy Periods
There might be periods where your property remains unoccupied, leading to loss of rental income.
Mitigation: Properly vetting and building a good relationship with tenants can lead to longer lease periods. Diversifying your investment properties across different areas can also help, as vacancy rates might vary from one location to another.
4. Legal and Tax Implications
Real estate investors can sometimes find themselves entangled in legal disputes or facing unexpected tax bills.
Mitigation: Regular consultations with a tax professional or attorney familiar with the real estate industry can keep investors informed and protected.
Long-term Strategy and Growth
Real estate investing is not just about making a quick buck; it’s about building lasting wealth. Adopting a long-term perspective and continuously refining your strategy can pave the way for consistent growth in the real estate industry. Here’s how:
1. Define Your Real Estate Identity
Are you more comfortable with a buy-and-hold strategy, where properties are retained for long-term growth and steady rental income? Or do you thrive on the excitement of flipping houses, where properties are bought, renovated, and sold for profit? Understanding your preference can help tailor your investment strategy.
2. Reinvestment is Key
For those adopting a buy-and-hold strategy, reinvesting the rental income can substantially grow your real estate portfolio. By channeling profits into purchasing additional properties, investors can benefit from compounded growth.
3. Diversify Your Portfolio
As you gain experience, consider diversifying across various real estate sectors. Branching out into commercial real estate or exploring real estate investment trusts (REITs) can provide additional avenues for income and growth.
4. Continue Your Education
The real estate industry is continually evolving. By staying updated on market trends, attending seminars, and networking with other real estate professionals, you can adapt your strategy and seize new opportunities as they arise.
5. Scale Strategically
A real estate empire begins with just one property. With time, dedication, and a sound strategy, it’s possible to grow your holdings into a substantial full-time income. As you scale, ensure you’re not overextending; always prioritize the quality of investments over quantity.
Key Tips for Beginners
Embarking on a journey into real estate investing can be thrilling, yet the complexities of the industry can sometimes overwhelm beginners. Simplifying the learning curve is essential for novice investors to make informed decisions and find success. Here are some pivotal tips to guide those just starting out:
1. Start Small and Scale Gradually
Many millionaire real estate investors began their journey with a modest property. Purchasing a smaller, more manageable property as your first investment can help you navigate the nuances of the real estate business without being overwhelmed. As you gain confidence and experience, you can then venture into bigger and more diverse properties to scale your portfolio.
2. Prioritize Education
The world of real estate is vast and ever-evolving. Leverage online real estate platforms to learn about market trends, investment strategies, and financing options. Additionally, joining real estate investment groups can be invaluable. These groups not only provide mentorship but also offer opportunities to share resources, insights, and deals with other investors.
3. Location is Crucial
In the real estate realm, location often takes precedence over the type or condition of a property. A mediocre house in a prime location can fetch better returns than a grand mansion in a less desirable area. Research local market dynamics, neighborhood amenities, future development plans, and other location-specific factors before making an investment decision.
4. Networking is Key
Surrounding yourself with knowledgeable people can fast-track your learning process. By connecting with seasoned real estate investors, you can gain insights from their experiences, avoid common pitfalls, and even discover potential partnership opportunities. Attend local real estate seminars, join investor forums online, and participate actively in real estate conferences to grow your network.
5. Stay Updated and Adapt
The real estate industry is not static. Market conditions, property values, and investment strategies can change. Being adaptable and staying updated on industry trends will ensure you remain ahead of the curve and can capitalize on new opportunities.
6. Always Conduct Due Diligence
Before diving into any real estate transaction, thorough due diligence is imperative. From understanding property taxes and zoning laws to estimating potential repair costs and evaluating tenant profiles, leaving no stone unturned will protect you from potential setbacks.
8 Terms Beginner Real Estate Investors Should Know
Venturing into real estate can feel like you’ve entered a world with its own language. Don’t worry; everyone feels this way at the start. Knowing basic real estate terms can help you communicate confidently and make informed decisions.
Dive into these essential terms every beginner should grasp:
Appreciation: Appreciation is the increase in the value of a property over time. It’s one of the primary ways real estate investors make money, especially in growing markets. Appreciation can result from factors like inflation, increased demand, or improvements made to the property.
Capitalization rate (cap rate): Think of the cap rate as a tool to gauge the potential return on a property. It’s a percentage derived from comparing a property’s net operating income to its current market price.
Cash flow: This term captures the money dance – what’s coming in and what’s going out. In the context of rental properties, it means the rental earnings minus all the costs. Positive cash flow indicates you’re earning more than you’re spending.
Equity: Equity represents the value of ownership in a property. It’s calculated by taking the market value of the property and subtracting any outstanding mortgage or loans against it. As an investor pays down their mortgage or if the property appreciates in value, their equity in the property increases. This equity can be tapped into for various financial needs or reinvested.
Leverage: This term refers to the concept of using borrowed money, often in the form of a mortgage, to invest in real estate. It allows investors to purchase properties with a small down payment and finance the remainder. When used correctly, leverage can amplify returns, but it can also increase the risk if property values decline.
Net operating income (NOI): Simplified, NOI is the profit made from a property after deducting all operational costs. It’s your rental income minus all the expenses, showing the true earning potential of a property.
Real estate owned (REO): An REO property is one that didn’t sell at a foreclosure auction and is now owned by the bank. These properties are often sold at a lower price because banks aim to sell them quickly, making them attractive to investors.
Return on investment (ROI): In simple terms, ROI measures the bang you get for your buck. It’s calculated by comparing the profit you made to the amount you invested. The higher the ROI, the better your investment performed.
Conclusion
Real estate investing offers an avenue to diversify your portfolio, generate steady income, and potentially achieve long-term growth. With due diligence, a clear strategy, and the right team, beginners can successfully navigate the complexities of the real estate industry and lay the foundation for a prosperous investment journey. Remember, every millionaire real estate investor started with their first property. Your journey is just beginning.
So, you’ve decided it’s time for you and your dog to move. You do your research, choose your preferred neighborhood and take the time to come up with several options for apartments you’d like to see. You set up viewings, find the perfect place and send in an application.
But if you’ll be renting with a dog, did you remember to check for breed restrictions? Some apartment communities have a list of restricted dog breeds — and may exercise restraint when it comes to “aggressive” dog breeds in particular.
If your dog is not accepted in your target apartment community, your application may get rejected even if you have good credit and income to cover the rent.
Before you begin the process of finding a new home — it’s important to understand what breed restrictions are and how they can impact your ability to rent with a dog when facing apartment breed restrictions.
What are apartment breed restrictions?
Breed restrictions are just what they sound like: Certain dog breeds and their mixes are not permitted to live in certain buildings, houses and apartments. That means that even if Fido is a mutt — he may not make the cut, depending on the various dog breeds in his mix.
Breed restrictions came about to protect people from what some consider “dangerous” or aggressive dog breeds — especially pit bulls. In other words, if dogs that are commonly associated with aggression aren’t allowed in, there’s likely less chance of attacks or dog bites within the apartment community.
If you’re unsure of your dog’s breed, get a DNA test done! It is tough to identify a breed or breed mix visually.
Dog breed restrictions by weight or age
Another common factor in breed restrictions is the weight and age of your dog. Because apartments are usually smaller than homes and condos, property managers may not want a large dog on-site. Often, renters are only allowed to have smaller breeds.
Age is another factor because puppies often are hyper and destructive, making landlords wary that they’ll tear up the apartment.
Why do apartments have breed restrictions?
There are three reasons dogs may face restrictions living in an apartment building:
Legislation: Some cities and counties have enacted breed-specific legislation that can ban certain breeds from even entering the city or county limits
Insurance companies: Many insurance companies have blacklists that the buildings or apartments they insure must abide by
Landlord’s choice: Breed restrictions are the decision of the building’s landlord or management company
Commonly restricted dog breeds
Each apartment community will probably maintain its own list of specific breed restrictions, but here’s a look at the most common aggressive dog breeds:
Akitas
Alaskan Malamutes
Bulldogs
Cane Corso
Chows
Doberman Pinschers
German Shepherds
Great Danes
Mastiffs
Pit bulls
Rottweilers
Siberian Huskies
Terriers
Wolf hybrids
Mixes of these breeds may also be restricted in some communities. Check with the property manager or leasing agent if you have any questions.
Are apartment breed restrictions legal?
Many activists, as well as some high-level animal organizations (including the American Society for the Prevention of Cruelty to Animals), are completely against breed restrictions for several reasons.
Consider this: Has Fido ever attacked another animal or human or acted aggressively above and beyond what’s normal for dogs? If not, why should he be restricted just because other dogs of the same breed have shown aggression?
Basically, many animal organizations agree that aggressive behavior in a dog is much more about nurture than nature — it all depends on how the animal grows up and how it responds to training. Plus, many believe that breed restrictions simply don’t work to lessen the chances of dog attacks or bites.
Unfortunately, breed restrictions have increased the number of homeless dogs — sometimes, owners simply set the dog loose or bring it to an animal shelter rather than trying to find an apartment that accepts all breeds.
What can I do if my dog is on a list of apartment breed restrictions?
Breed-specific restrictions have been slowly decreasing — great for loving dog owners like you! However, that doesn’t necessarily mean that insurance companies or landlords are going to change their minds.
If Fido is not welcome off the bat, there are a couple of things you still might be able to do to persuade your landlord into giving your beloved fur baby a chance.
1. Request a pet interview
If the breed restrictions are in place by a landlord (not an insurance company), there’s still hope! Ask the landlord if he or she is willing to do a doggie interview during which he or she can meet and interact with Fido.
If the building has an area for dogs to roam, ask if you can hold the interview there. That way, the landlord will be able to see Fido has no aggressive tendencies toward dogs or people. Create some talking points to guide the interview in the right direction.
Talk about your pet being part of the family — especially the role they play as a family member. Discuss your understanding and good track record of keeping your past properties clean and well-maintained, despite your dog(s). Offer additional money on your non-refundable pet deposit.
2. Create dog resumes
Next time you apply for an apartment, come prepared. Put together a pet resume for Fido with pictures, vet records and any other information you have. You can even bring along a video to show the landlord. Who will be able to resist those puppy dog eyes?
Apartment Guide has a simple tool that will let you build a printable pet resume for your animals.
3. Provide references
Your future landlord might not always want to meet your pet right off the bat, especially if they have a fear related to aggressive dog breeds. If this is the case, ask your vet, groomer, pet sitter/boarding facility or friends and family to write letters of reference for your furry friend.
4. Gather vet records
Gather up and provide proof of your pet’s medical records (i.e. vaccinations, Rabies shots, tag registration, etc.)
5. Create a video
Make a video of your pet showing it as a part of your family. If possible, try to include shots of interactions with children, other pets and elderly people. This might build trust between your potential landlord and your pet.
6. Offer to pay pet rent
We’ve all heard the expression that “money talks.” You might be able to offer your landlord a little more security with the promise of extra monthly rent for Fido.
7. Secure renters insurance
Many landlords will want you to have your own kind of Renters’ Insurance regardless of your pets, but in this case, try taking it a step further. Offer to secure a policy that covers your pets and has a liability policy that covers them of $300,000 — listing the landlord as an additional insured member.
Additional animal restrictions
Thinking about becoming the next Tiger King? Great! Just check with your landlord or state first.
Often, pets other than dogs face restrictions, too. Any animal from hedgehogs and ferrets to zebras or certain snakes may not find itself welcome.
Pet owners should take restricted breeds seriously
It might be tempting to lie on your application about your pets, but lying is the worst thing you can do. If a landlord discovers you’ve been dishonest about your pet(s), they can potentially evict you — and living on the street is not an option.
Wesley is a Charlotte-based writer with a degree in Mass Communication from the University of South Carolina. Her background includes 6 years in non-profit communication and 4 years in editorial writing. She’s passionate about traveling, volunteering, cooking and drinking her morning iced coffee. When she’s not writing, you can find her relaxing with family or exploring Charlotte with her friends.
I bought two laundromats over the last year and I have learned so much after diving into the business headfirst. I am not an expert on laundromats but I have learned enough to point out some of the pros and cons for someone thinking about geting into the business. I bought one of the laundromats with the real estate and the other I am leasing. There are pros and cons to both of those structures as well. I love the business and people can make a lot of money but it is not as easy as it may appear.
Why did I want to get into the laundromat business?
My main career is real estate. I own commercial, multifamily, and single-family rentals. I flip houses and I also own a real estate brokerage and have an online presence with this blog and social media. I have a successful YouTube channel and love doing different things. I have always wanted a brick-and-mortar business to go along with my real estate and online businesses. In 2022 I bought a building that came with a liquor store and a mini-mart. That has been a fantastic experience and I loved every inch of it. I also bought a bar in 2022 which was a horrible experience I never want to experience again!
Being in the online real estate niche I have met many interesting investors and business people including Brandon from Investment Joy who owns laundromats. I loved watching him collect quarters and it appeared his laundromats had done very well. I decided that would be a business I wanted to get into at some point even before I bought the liquor store. I even tried to turn one of the bars I bought into a laundromat without any success. Then I ended up buying an 8 plex with coin-op laundry and I realized how much I love collecting quarters.
I knew I wanted a laundromat but I was not sure how to get one because starting a laundromat is so difficult and I had never seen one for sale in my area before.
How to get started investing in real estate
Why did my first attempts at starting a laundromat fail?
Since I could not find any laundromats for sale I tried to start one from scratch. I had bought a building in a small town that used to be a bar but the bar shut down during covid. I was thinking of opening it back up as a bar again but that did not go as planned. There were no laundromats in this town or any of the other towns within 10 miles so I thought the area would work well.
I will be the first to tell you I was naive and in way over my head. I did not realize how hard it would be to start a laundromat from scratch. Here are some of the issues I ran into.
The city wanted me to bring 2 shares of water to get a laundromat approved in my building. I am in Northern Colorado and that would have cost me $70k for each share if I could find them.
To buy all new equipment (for a fairly small building) was going to cost me more than $200,000. Commercial washers and dryers are expensive and most companies offer financing for that reason.
Not only did I need new equipment but I needed to upgrade the electrical, gas, and plumbing. Many of the big washers require 3-phase electricity.
To run big machines you usually need a concrete slab to handle the weight and torque they produce. My building had wood floors with a crawl space.
After looking at the numbers, I knew there was no way this laundromat was ever going to make money if I financed all of the equipment and repairs. It was going to cost me close to $500k to start this laundromat in a building I already owned and it was not going to be very big. I thought I was being clever starting a laundromat and could not figure out why no one else had done it yet. I realized there was a reason very few people start new laundromats!
How did I find a laundromat for sale?
I put my dreams on hold for a while but as I was still very active in the real estate world. I post videos of all of my deals on my YouTube channel including my effort to start a laundromat that did not work.
Because of my videos, someone reached on on YouTube and said their family might have a laundromat for sale soon. This was a very small laundromat with a very small car wash in a small town but it was better than nothing. I talked to the person who said it might be for sale but we could not get a deal done. They wanted to trade a house for the property and I did not have anything they wanted.
Then about 6 months later, they reached back out and said they really wanted to sell now. It took months but eventually, we made a deal I was able to buy an existing building with a laundromat, a small apartment, a 2-bay car wash, and a 600 sqft shop. I paid $310,000 for everything which is not bad considering I am in Colorado where real estate is very expensive.
This laundromat had only top-loading washers and very old dryers but it has taught me a ton about the business. I am working on getting better machines for it now which is not easy to do!
What have I learned from my first laundromat?
There were many things I did not know about owning a laundromat before I bought it. I tend to jump into things before I know everything which can be good and bad. The previous owners gave me almost no information on the utilities, income, or the property at all. However, I knew the apartment, shop, and space where the laundromat was were worth what I paid even if the laundromat was not there.
Here are some key points I have learned so far. I will be totally honest and admit the business is not making money yet but I think it will eventually.
Finding big machines is very hard! I thought it would be easy to find some of the bigger machines the other YouTube laundromat guys mention are their big money makers and it is not. The big companies with new or used machines will not even return my calls or emails because I am so small. I have found some bigger machines but I had to search far and wide for used machines from individuals in my state.
Finding people to work on the machines is hard! I have called every appliance person I know in the area and most of them don’t work on appliances anymore and those that do won’t work on laundromats. I have found some people but they are pretty far away, charge me trip fees, and take their time. I found that most laundromat owners work on the machines themselves.
The big machines are not a simple installation. I have a couple of larger machines but they need a concrete pad, 3 phase-electric, and someone who knows what they are doing. I am not sure my small laundromat will ever be able to use the big machines because it also has a wood floor with a crawl space.
Finding parts to repair machines is hard! After finding some people who can work on the machines I ordered parts or tried to order parts for some of the broken machines I have. I actually took over a second laundromat with bigger machines and some of the parts needed are not being manufactured and are out of stock everywhere.
Used machines are so much cheaper than new ones. While it is hard to find used equipment it does come up for sale occasionally. Some companies and people will tell you, you must have all new but I have found others who swear by used equipment. Instead of spending $200k you could spend $40k for the same machines but realize you may need to repair the older machines more often.
Conclusion
It took me a long time to find a laundromat, to learn the ins and outs, and to network with people in the industry. However, it has been a ton of fun and I have just scratched the surface of the industry. I plan to improve my laundromats and document everything I learn along the way. I took over the lease on a newer bigger laundromat this summer as well and I can’t wait to see how it does when we open. I found that laundromat through networking and people knowing I was looking for machines from my YouTube videos.
Working from home has emerged as a common option for some employees as many companies have adopted the hybrid model and new work from home trends have evolved.
A dedicated workplace is becoming more of a priority for employees, especially those who live with roommates or other family members in an apartment. An extra bedroom or a nook is now an essential feature when people consider moving to or renting a new apartment.
While some employees have returned to the office, other people work for companies that allow a hybrid schedule and only require going to the office two to three days a week. Creating an office atmosphere is critical, especially for people who work with teams or spend many hours of the day on phone calls or video meetings. Sitting at the dining table or in a corner of the living room is no longer a conducive work situation for some people who want a dedicated space.
Here are six work-from-home trends that renters are seeking for 2022.
1. Extra bedroom-nook
“Renters will continue to prioritize functional remote workspaces,” said Ericka Rios, co-founder and director of leasing for Downtown Apartment Company, a Chicago-based brokerage that matches renters with approximately 16,000 apartments in more than 200 properties across the Windy City.
Rios also expects renters to seek work from home-friendly floor plans offering bonus rooms or pocket office nooks.
“Working from home has become a permanent part of the landscape with Chicago renters and they are changing their living situations to accommodate it,” she said. “While some workers have gone back to the office, many are still working from home some or all of the time and need a more functional space for their home office. Many have upgraded to a larger living space with an additional room dedicated to a home office, while others are moving to buildings that offer a more traditional co-working space. The common thread is that nearly everyone has prioritized finding a functional WFH situation within their apartment community.”
Maria Abbe, a public relations executive who lives in Florida, said she recently moved into a two-bedroom apartment to have additional space.
“I wanted extra space, ample lighting and an open kitchen/living room so I don’t feel like I’m holed up in one room all day,” she said. “The palm trees help, too.”
2. Storage areas
Having enough storage in an apartment or in another part of the building is important to many people who prefer to spend their time outside and want to safely stash their sports or exercise equipment, such as a bicycle.
“Storage space in the common areas is critical these days,” said Teresa DeVos, executive vice president of operations at RKW Residential, a Charlotte, NC-based, third-party, multifamily management firm that oversees more than 30,000 apartments throughout the southeast region.
“How that space is designed and delivered depends on the demographics and geographic area the community is located in,” she said.
Secure storage located in a nearby location is a consideration
A community in a walkable, urban neighborhood requires significant space for bike storage. Renters working from home want to get their bikes out of the apartment and in a secure space.
“One of our communities located on the water has many kayaking enthusiasts as residents, so we had to allocate space for kayak storage,” DeVos said. Working from inside an apartment all day makes getting fresh air and exercise that much more important.”
3. Adequate natural light/more windows
When you spend all day working from home, having enough natural light emerges as a priority. Some people thrive in work environments with a lot of sunlight and are more productive.
“Natural light or a big window to place your workstation is vital for the workday when you live in New York City,” said Raj Nijjer, CMO of Refersion, a company that helps online shops track sales driven by promoters, influencers and affiliates. He prefers anything green or trees outside and likes having the ability to take a short walk on quiet streets for breaks or phone calls.
“Natural light is very beneficial to wellness, especially for those who work from home,” said Linda Kozloski, creative design director at Lendlease, an Australian-based integrated real estate and investment group.
The broad windows at Cascade, a 503-unit luxury apartment tower that recently opened in Chicago’s Lakeshore East neighborhood, and Porte, a 586-unit development in Chicago’s West Loop that opened during the pandemic, not only let in the “ample daylight that residents desire, they offer views of the skyline and nearby parks, allowing residents to take mini breaks as they work, moving their eyes from their screen to the view,” she said.
“The most common request we are getting from renters about working from home is having the ability to carve out a little area of the apartment as a space to work comfortably and with plenty of natural light or LED lighting,” DeVos said.
“We have taken the step of staging our model apartments to incorporate such spaces so prospective renters can visualize what working from home would look like,” she said.
Large windows help with productivity
Freda Moon, a travel editor at SFGate, said having a view like a big window overlooking a park and a location with restaurants and bars nearby with a lot of activity becomes more important. “I don’t want to feel cooped up,” she said.
Large windows with natural light and “a view of the city to feel like I was in a real office which helps with productivity,” said Justine D’Addio, a publicist for startups, who works from home in downtown San Francisco. “Having a larger than average balcony is great for work breaks and overlooking whatever ‘hustle & bustle’ is left here,” she said.
4. Noise control
Being able to manage the amount of noise from inside the apartment and from within the building is critical for people who need less noise to complete projects. WFH employees find this to be a necessity, especially if they’re living with a partner, children or roommates.
“There has always been high demand for sturdy, well-built communities, but now that more of our residents are working from home, they appreciate that our projects are designed to high acoustical standards,” Kozloski said. “The double-glazed glass in the façades of Porte and Cascade act as a noise-mitigation measure, ensuring that most external sounds are not detectable.”
Other people want a quiet respite from street noise or have no desire to hear their neighbors walking around their apartments. Michael Dehls, an IT professional living in Rutherford, NJ, said, “I think the ability to manage noise is extremely important, especially for couples. ”
His previous apartment had no doors between rooms, which made it tough when both he and his wife had to take conference calls simultaneously. Their new apartment has doors in most of the rooms.
“Being able to limit the amount of noise she heard from her neighbors was essential,” said Liz Froment, a Boston resident, who moved during the pandemic.
“A huge one for me was limiting neighbor noise,” she said. “I went from being surrounded on all sides to a top floor corner unit sharing only one small wall.”
5. Meeting or co-working room
Being able to work in a meeting room in the apartment’s lobby or having a silent booth for taking phone calls is a necessity. Others need a break from their roommates or family members.
“Building amenities like co-working areas with meeting rooms, private booths or dedicated Zoom rooms will be in high demand during the year ahead,” Rios said.
“Renters also want the ability to create such environments throughout the community, whether it is individual ‘phone booth’ private spaces to make calls and have virtual meetings or co-working areas for small groups to get projects done,” DeVos said. “If we can incorporate small workspaces into rooftops, especially in cities with great views, we make sure to do so.”
Change of scenery needed for WFH employees
“The amenity arms race has always included meeting spaces that allow residents a change of scenery so they can get work done outside of their unit,” Kozloski said. “Since the start of the pandemic, some buildings also offer work pods that are designed for one person to do head-down work.”
“At Cascade (which is 50 percent occupied) there have been nearly 600 reservations for the two reservable conference rooms since launching reservations on Oct. 1,” she said. “These spaces are open 24 hours a day and the most popular reservation time is between 1 p.m. to 3 p.m. Cascade also added Stockwell vending machines, coffee service and a Print with Me printer in this same space as the reservable study areas as a convenience for those that work from home.”
“A top consideration for renters is how an apartment building provides working from home options,” said Jon Schneider, senior vice president for Fifield Cos., a Chicago-based boutique real estate developer that owns multifamily buildings in multiple markets, including two properties that opened during the pandemic in Chicago.
Their buildings are primarily located in or near city centers, which offers easy access for those who have returned to the office, but “estimates show about 50 to 60 percent of its residents are still working from home,” he said.
“We anticipate the flexibility to work from both an office and from home will continue to be a factor for the long term,” Schneider said. “Data suggests eight out of 10 renters expect to be working from home at least part of the time now and in the future,” he said.
Demand for co-working suites is rising
“Residents at their building in the Logan Square neighborhood of Chicago like having access to a full co-working suite with individual booths providing separation with a sense of openness, small offices offering a less distracting, more private space for phone calls and focused work and a more traditional conference room with a large table and wall-mounted monitor for group meetings or space to spread out,” Schneider said.
“Having this common space allows residents the flexibility to lease whatever floor plan best fits their budget and lifestyle because they know work-from-home space is covered,” he said. “The co-working spaces in our buildings like Logan Apartments and Westerly are consistently utilized and some residents even bring an entire computer set-up with monitors and PCs down to the co-working space on a daily basis. In terms of COVID protocols, we follow whatever the local government guidelines are for masks and social distancing.”
6. Outdoor space
Having access to outdoor space at the apartment complex, such as a balcony with adequate room for a table and chairs, a small garden and/or a dog park, is what some renters prefer.
Some renters find that having a dog park is just as important as having enough light or an extra room.
A dog park is what made the difference in choosing the last apartment for Angela Tague, a marketing writer and journalist who lives in Sioux City, IA.
“It was great for my dog to exercise and meet other dogs and got me outside more,” she said. “Win. Win.”
Access to outdoor areas is a priority
The Downtown Apartment Company in Chicago said 75 percent of its rental clients now want access to private outdoor space and they’re willing to pay a premium for it. Units with balconies tend to rent at 30 cents to 40 cents more per square foot. Rios also said that the No. 1 location for a balcony is off the bedroom, which can be hard to find as most units feature a balcony off of the living area.
“Another interesting insight is that balconies are leveling the playing field a bit between older Class A buildings and newer Class A+ buildings with tons of high-end amenity space, but no private balconies, ” Rios said.
“Balconies allow renters to work outside in temperate weather,” she said. “I’ve heard from the Porte leasing team that balcony units were the first to go because people wanted that second location to work from home.”
“Both Cascade and Porte have generous outdoor amenity decks that include, among other things, plenty of lounge furniture where renters can sit with a laptop to get work done. In addition, Cascade has a 32nd-floor lounge space overlooking Navy Pier that includes an adjacent study room for those who want great views and a quiet space.”
Work from home trends will continue
Many work-from-home trends will continue in 2022 as renters seek new living quarters. Some will continue their hybrid work models, while others will spend more time in the office.
Employees prefer to have a defined workspace, whether it’s another room or areas dedicated to relaxation or exercise, such as a balcony, small green space or a dog park. They want to spend time outdoors and away from their screens.
Okay, so you’re tired of puttering along in that same 1996 Honda Civic with which you picked up your Homecoming date during your senior year of high school. How do you even begin? No doubt, you’ll have questions to ask when buying a used car. Well, first, you need to narrow it down to which car you want, what options you want/can live without, your budget, etc. Once you’ve gotten that down and have taken a few cards for a spin, it’s time to get down to business.
I bought my first car just about ten years ago and have bought and sold seven cars within that time frame. Except for one, I made a profit off every single one of them. For example, My INFINITI G37 just stole my heart. I got such a good deal on it (I bought it for $4,700 under dealer internet price) that I made the conscious decision to take a loss by keeping it longer and thus having to deal with depreciation.
However, it never needed any maintenance for the six years I had it other than $40 oil changes periodically. So, considering all costs (parking, annual registration, gas, car insurance, and depreciation), the car probably cost me $150 per month over those six years. That’s well below what some friends spent on the luxury of ride-sharing.
What to Ask When Buying a New Car
When you’re ready to buy a used car, you want to come armed with questions. Ensure you’re informed, and then you come across as a knowledgeable buyer and ward off any unscrupulous sales tactics.
#7. When Is the Best Time to Buy a Used Car?
We’ve all seen those charts on the best time to buy everything from winter apparel to laptops. But did you know there is a sweet spot for buying cars, as well? Buying towards the end of the month and even the end of the year is your best bet. Why? Because dealerships have quotas to meet, salespeople are hungry to get one last commission for their paycheck.
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As far as the end of the month, most dealerships close the books, project that month’s sales amounts, and try to move inventory to keep the interest fresh. You may know that when new models come out and leases get returned, the used car market is usually more flexible, which means more selection and a better price for you.
If you’re daring, go into the dealership on a Sunday evening during unpleasant weather when they’re hungry to meet quotas. If you’re paying cash, and you’re there with money in hand, they’re much more likely to get you a good deal. Make sure you come with evidence of comparable models elsewhere.
#6. Why Is Buying Used Better Than New?
While many people justify their decision to buy new as having a more reliable vehicle and spending less on repairs than an older car, cars have markedly improved their dependability over the last 10-15 years.
Plus, many online tools help you with price transparency, find service records, and owner/expert reviews. You’ll find anything you want to know about the car you’re considering over the last decade.
According to a recent report, new cars lose up to 20% of their value after the first year. And then they depreciate more than HALF their value after five years. On a $32,000 car, that’s almost a $7,000 hit after just a year of driving! On the other hand, you can easily buy a car that’s just a few years old and let someone else take the depreciation hit.
Besides houses, cars are generally the most expensive purchases you’ll make. Buying used enables you to strategically get a reliable vehicle that can last you years without breaking the bank. My neighbor once bought a 4-year-old Honda Accord for $12,000 and still drives it ten years and 90,000 miles on the odometer later!
#5. Why Is Buying Better Than Leasing?
According to Consumer Reports’ comparison for buying versus leasing, the average cost of a new car has now topped $38,000. You might think to yourself, “I don’t have $38,000 laying around!” Well, take a step back and a deep breath, realizing this is average. Meaning, you can easily find cars for less than this amount. Plus, just another reason to look at a mint used car!
Leases can be appealing because they enable the consumer to drive a new car for a monthly lease payment. Lenders are happy to collect the interest! And then, you return the vehicle at the end of the lease without worrying about maintenance or repairs. Leasing is ideal for people who like to have the newest car (and can afford it) or deduct leasing expenses like realtors. And yes, if you’re wondering about this question, you can lease a used car as well. However, there are mileage limits, and if you lose your job or have a child, you typically can’t just hand the keys back without penalty.
Buying a car means you can drive it freely and have something of value that you can sell when the need arises. With leasing a vehicle, you typically have to either return it, have nothing at the end of the lease, or pay off the car at an agreed-upon amount when you lease the vehicle. For these reasons, buying a car is the best option for most people.
#4. How Many Miles Should a Used Car Have?
Congratulations, we’ve convinced you to buy used! Well, hopefully, you’re empowered to ask questions and find and buy a quality used car, over lining the dealership’s pockets with a new one. Mileage is an essential factor to consider, and the lower mileage, the better. Think about it, cars don’t run forever. So, there’s a cap on mileage before the vehicle is pretty much worthless. (though if you want to see some impressive machines with millions, yes millions of miles, check out this car.)
Most people drive about 10-12,000 miles per year. And with ever-changing technology, it might be best to keep it under 100,000 if you plan to keep the car for a while. After 100,000 miles, more expensive servicing like timing belt change, transmission replacement, and electrical repairs come along.
Consumers who question a used car’s value can turn to The Kelley blue book as an excellent resource when buying or selling. I have found that buying cars with low-mileage, i.e., under 30,000, is the sweet spot if you can snag a good deal because it still feels new. These cars usually come with the balance of a new or extended warranty and yet have decent value locked in. Bonus points if you flip it a year later for a profit as I did!
#3. What Are the Benefits of Buying a Used Car from a Dealer?
You can compare buying a certified pre-owned (aka used car) from a dealer instead of a private party to purchasing a laptop from the store versus a seller on Amazon. You typically get more hand-holding and a concierge process with inspection of the car, service and registration assistance, etc. Yet, that comes with a price.
Buying a used car from a dealer means there’s no question: they have to stand behind that car and not sell you a lemon because their reputation lies on that. So, peace of mind is a big plus when it comes to buying from a dealer. Also, you can typically find more variety in what you want and have someone reach out to you when they get something closer to what you’re looking for. You can also negotiate free service for a year, a multi-point inspection, printouts of service records, and things like replacing the tires at a reduced cost. Moreover, suppose haggling, negotiations, or dealing with salespeople make your stomach churn. In that case, you can always pay a slight premium for peace of mind by using a service like Carvana or Carmax.
Buying from a dealer can also help you make sure you get your title and tag done correctly. One thing to look out for is some dealerships charge a Dealer or “Document Preparation” fee, which can be hundreds of dollars in some states. Be sure to understand what value they’re providing for that fee and where it goes. Few waive them and even charge their employees that fee.
#2. What Are the Benefits of Buying a Used Car Privately?
How do you save the MOST amount of money when buying a car? Well, you buy a pre-owned vehicle that already got whacked with depreciation and cut out the middleman. By middleman, I mean the dealership.
Now, you read about the perks of buying through a dealer and all the peace of mind it brings. So, why bother dealing with the hassle and uncertainty of a private party? Well, the significant cost savings, of course! There’s no dealer doc prep fee, no markups to pay for payroll or overhead, and no burdensome certification process. Buying a used car privately gives you the best chance of getting a great deal if you ask the right questions.
In simpler times, a handshake and trust were all we had to go off before things like CARFAX reports and AutoCheck. When you find a private seller, you can find out the vehicle history. For example, if they were the original owner, who drove the car, why they bought it, and how it’s been treated over the years. Also, you’ll have to make sure they have the title free and clear. Otherwise, you’ll want to go to the bank and have them call the company that holds the title to make sure the loan gets paid off before any other money changes hands.
#1. What Are the Best Ways to Find a Used Car?
Now how do you go about finding a used car? There are many more online tools at our disposal than ever before. Do you remember the times when you would flip to the classified section of the newspaper to find boxes of 6 point font describing a car for sale? Or you saw a car parked on the road with a “For Sale” sign? How times have changed.
Now, you can easily find any car you want online, know everything about it, see high-resolution pictures of its every angle. And you don’t even have to limit yourself to your geographic area!
The thing to know is most private-party sellers will usually try to sell their car for free or cheaply. So, be sure to start your search by scanning Craigslist, Cars.com, and Facebook Marketplace.
Expand Your Search
Now, if you’re looking to expand your search across the state or nation, check out cars.com, Cargurus.com, and Truecar.com. All of these sites provide decent vehicle descriptions and history, such as accident reports.
Cars.com has a very user-friendly interface and easy navigation filters for color, features, cloth/leather, etc. It also has a price analysis tool to let you know if that particular car is a “good” or “great price” as compared to other vehicles for sale.
CarGurus is also user-friendly and has a similar price comparison tool. Also, it’s got a cool little “negotiation” section in the description. It tells you how long the car has been on the market and its different price changes. It can give you a glimpse of how motivated the dealer is to get rid of the vehicle. I love CarGurus because it answers the most basic questions I’d ask about the used car I’m thinking about buying.
Finally, TrueCar has a unique pricing analytics report that will tell you what you can expect to pay based on what similar vehicles have sold for. They also can offer a unique “personalized offer” on a car, which might be lower than other sites, in exchange for inputting your contact information. It might be an easy trade to shave a few hundred off your car purchase!
Final Thoughts about Buying A Used Car
Consumers looking to buy a used car certainly have to ask a lot more questions than when buying new. But, the extra work will save them thousands in unnecessary depreciation. The key is to do your homework and get the car inspected. That way, you’ll come out ahead by knowing the car’s history. And don’t be afraid (ever) to walk away from a bad deal!
Asset turnover ratio is a calculation used to measure the value of a company’s assets relative to its sales or revenue. It’s used to evaluate how well a company is doing at using its assets to generate revenue.
Similar to cash flow, the asset turnover ratio compares the company’s total assets over the course of a year to its sales. In simpler terms, it shows the dollar amount the company is earning in sales compared to the dollar amount of its assets. It can be calculated annually or over a shorter or longer period of time.
Why Is Asset Turnover Ratio Important?
Although having cash on hand is important for growing and maintaining a business, other types of business assets are also important, as is how a company chooses to use them. Liquid assets can include cash, stock, and anything else the company owns that could be easily liquidated into cash. Fixed assets are things the company owns that are not as easily turned into cash. This could include real estate, copyrights, equipment, etc.
For business owners, asset turnover ratio can be important when applying for loans and learning about their company’s cash flow. A higher asset turnover ratio indicates that a company is efficiently generating sales from its assets, while a low ratio indicates that it isn’t. A higher asset turnover ratio also shows that a company’s assets don’t need to be replaced or discarded, that they are still in good condition.
A higher ratio is preferable for investors, as well. Investors can look at the asset turnover ratio when evaluating the risk of investing in a company, or when comparing similar companies to one another. Each industry has different norms for asset turnover ratios, so it’s best to only compare companies within the same sector. For instance, a utility company or construction company is more likely to have a higher number of assets than a retail company.
Know, too, that asset turnover ratio is only one of many calculations that comprise the list of financial ratios that investors can employ. 💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.
Formula for Calculating Asset Turnover Ratio
It’s fairly simple to calculate asset turnover ratio, which is one reason it’s such a useful tool for investors. Asset turnover ratio can be calculated using the following formula, which divides total (net) sales or revenue by average total assets:
Net Sales = Gross annual sales minus returns, allowances, and discounts. Total sales can be found on a company’s income statement (typically part of an earnings report).
Beginning Assets = Assets at the beginning of the year
Ending Assets = Assets at the end of the year
Total Assets = Generally a company will include calculated average total assets on their balance sheet. However, sometimes additional calculations will need to be made.
Calculating Total Assets
The value of a company’s total assets includes the value of its fixed assets, current assets, accounts receivable, and liquid assets (cash).
• Accounts receivable are accounts that hold expected revenues that come from when customers use credit to buy goods and services.
• Fixed assets are generally physical items such as equipment or real estate.
• Current assets are things that the company predicts will be converted into cash within the next year, such as inventory or accounts receivable that will be liquidated.
The formula for calculating total assets is:
Total Assets = Cash + Accounts Receivable + Fixed Assets + Current Assets
Example of Calculating Asset Turnover Ratio
To give an example of the ratio calculation, if a company has $2,000,000 in average assets and $500,000 in sales over the course of a year, the calculation of its asset turnover would be:
500,000 / 2,000,000 = 0.25 = 25% asset turnover ratio
Interpreting Asset Turnover
Sticking with the example above, we’ve calculated a 25% asset turnover ratio. What that means, exactly, is that the company’s assets generated 25% of net sales over the course of the year. In other words, every $1 in assets that the company owns generated $0.25 in net sales revenue. Again, this can be helpful when using various business valuation methods and trying to determine whether an investment fits your overall strategy.
Factors that can Cause Low Asset Turnover
There are several reasons why a company might have a low asset turnover. These include:
• More production capacity than is needed
• Inadequate inventory management
• Poor methods of customer money transaction
• Poor use of fixed assets
The ratio can also change significantly from year to year, so just because it’s low one year doesn’t mean it will remain low over time.
What Is a Good Asset Turnover Ratio?
Investors can use the asset turnover ratio as part of comparing and evaluating stocks. But what is considered a good number for asset turnover?
In general, the higher the number the better — and a number higher than 1 is ideal. This is because a value greater than 1 means the dollar value generated by assets is greater than the dollar amount that the assets cost. A higher number means a company is generating sales efficiently and not wasting assets.
Conversely, a number less than 1 means that assets are generating less than the amount of their dollar value. If a company isn’t effective at generating sales with its assets, it most likely wouldn’t be a great investment — which, again, is important to know if you’re building an investment portfolio.
Since each industry has its own standards for a “good” asset turnover ratio, there isn’t one specific number to look for. For companies in the utilities industry, ratios are generally lower than companies in retail.
Companies can work on improving their asset turnover ratio by increasing sales, decreasing manufacturing costs, and improving their inventory management. Other ways they can improve include adding new products and services that don’t require the use of assets, and selling any unsold inventory still on hand.
What Does a High Ratio Imply About a Company?
If you’re using technical analysis techniques to get some clarity around a company as a possible investment target, you’ll want to get down to brass tacks: What, exactly, is a high ratio telling you?
The answer is that a high ratio implies that a company is in good standing. It’s generating value with its assets, which can signal that it may be a solid investment. But, again, there are no guarantees.
Limitations of Using Asset Turnover Ratio
While asset turnover ratio is a useful tool for evaluating companies, like any calculation, it has its limitations. It is useful for comparing similar companies, but isn’t a sufficient tool for doing a complete stock analysis of any particular company.
Also, a company’s asset turnover ratio could vary widely from year to year, making it an unreliable measure for potential long-term investments. Even if the ratio has been similar in years past, this doesn’t mean it will continue to remain consistent. However, investors can look at the long term trendline of the ratio to get a general indication of whether it’s improving or not.
Since asset turnover is typically calculated once a year, if a company made even a few large purchases this could skew their ratio. This is fairly common, as companies might have certain monthly expenses but occasionally need to invest large sums of money into equipment, office renovations, or other common business needs. 💡 Quick Tip: The best stock trading app? That’s a personal preference, of course. Generally speaking, though, a great app is one with an intuitive interface and powerful features to help make trades quickly and easily.
Drawbacks of Asset Turnover Ratio in Stock Analysis
The limitations outlined above play into some of the potential drawbacks of the asset turnover ratio when analyzing stocks, too. Mostly, it comes down to the fact that as a single ratio, which doesn’t reveal the total health or financial picture for a single company. For that reason, it’s probably a good idea to use the ratio in tandem with other analysis tools and methods.
For instance, other ratios that can be used to gain an understanding of a company’s financials are the debt-to-equity ratio, its P/E ratio, and even looking at its net asset value.
The Difference Between Asset Turnover and Fixed Asset Turnover
Fixed asset turnover and asset turnover are two different ratios that can tell you about a company, and for investors, it’s important to understand the difference between the two.
In short, and to recap, asset turnover ratio looks at average total assets of a company — “total,” in this case, being the important qualifier. On the other hand, fixed asset turnover ratio looks at a company’s fixed assets to measure performance.
Investing With SoFi
Knowing how to calculate asset turnover ratio can be useful for investors who are evaluating companies as they start building an investment portfolio. While the formula is simple — Asset turnover = Net Sales / Average Total Assets — it’s important to remember that the calculations work best when comparing companies within one industry, rather than across various industries.
Additionally, there are other metrics by which to evaluate a company or value its stock. The asset turnover ratio can be helpful, but it has its limitations. As always, speak with a financial professional if you feel like you’d benefit from more guidance.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.
FAQ
How can you improve asset turnover ratio?
Some ways that a company can improve its asset turnover ratio include increasing its revenues, selling some of its assets, renting or leasing assets rather than purchasing them, and optimizing its inventory and ordering systems.
Is an asset turnover of 1.5 good?
Yes, an asset turnover ratio of 1.5 is a sign that a company is on solid financial footing. It indicates that a company’s total assets are generating enough revenue from its current assets.
Can asset turnover ratio be negative?
Yes, and a negative asset turnover ratio would be a signal that a company lost money during the year, rather than earned it. A negative number represents that its liabilities or expenditures exceeded its assets.
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Are laundromats profitable? Or, are laundromats a dying business? Learn how much laundromats make and if laundromats are a good investment.
Are laundromats profitable? Is buying a laundromat a good investment?
Ever wondered if owning a laundromat is as profitable as people say?
I’ve been seeing a lot of videos on social media lately talking about how much money laundromats make (seems like it’s a popular small business idea right now!). So, I wanted to do my own research and learn as much as I could on the topic of laundromat businesses to see why it’s trending so much.
Whether you are looking to make extra income or if you plan on opening several laundromat businesses, there are some things to think about before you get started.
In today’s article, we’re going to talk about:
How profitable a laundromat can be
The pros and cons of owning a laundromat
Why a laundromat may be a smart investment
Tips on how to find a laundromat to buy
And more.
Quick summary: Yes, laundromats can be a way to make money (and even passive income!) due to people needing to wash their clothes and low costs to run. However, the amount of money that you can make is based on factors such as location and maintenance costs (new machines can be expensive!). High-quality laundromats with lots of amenities are in, and the old days of dirty and hot laundromats are not.
Are Laundromats Profitable?
Is owning a laundromat a good investment? Is owning a laundromat a good way to make money?
According to the Coin Laundry Association, there are around 35,000 laundromat businesses in the United States and nearly 95% of laundromats succeed.
That is a pretty good success rate.
It’s important to understand that, like with any other business, laundromats require an investment of money—both initial and ongoing. You’ve got your rent, machines (you will need more expensive commercial laundry equipment), utilities, and insurance.
The good news is, your income would hopefully be higher than these costs, making you a profit at the end of the month. Some people are able to run a laundromat as their full-time income, and for others it may simply be one of their side hustles.
The amount of money that you can make from a laundromat depends on your management skills, the location of your business (the average laundromat user lives within 1 mile of the laundromat that they use, so you want to be close to your customers!), and more.
Related content:
Is a Laundromat A Smart Investment? Do Laundromats Make Money?
This is a hard question to answer, as everyone is different!
For some people, a laundromat can be a smart investment, for others it may not be. The good thing, though, is that you are reading this article so that you can figure out if owning a laundromat is for you or not.
Yes, many laundromats make money. On average, a laundromat can earn a profit of around 20% to 30%.
Note: Before making a decision, I highly recommend reaching out to a financial advisor before making any decisions.
Factors Impacting A Laundromat’s Net Income
There are numerous things that can impact how much money a laundromat can make such as:
Location– The location of a laundromat is important in how much money you can make. This is because a laundromat located in a populated area often makes more money than one in a less populated area. The reason is, that when there are more people, there are more people likely to use laundromats.
Competition– If there are other laundromat businesses nearby, this could impact your profit because you now have competition. This is because too much competition may mean that there are less customers coming to your business.
Demographics– The demographics of people living around the area of your laundromat are important. For example, laundromats tend to do better in areas with a lot of renters, college students, or households without a washing machine or dryer (of course).
We recently stopped to use a laundromat while we were traveling in our RV. One thing we noticed was that this laundromat had a ton of amenities. Now that I’m thinking about it, this laundromat business owner was smart. They knew what their potential customer needed. They opened a laundromat right next to a popular cross-country trail, and added great amenities such as snacks and even a pay-to-use shower. These factors helped this laundromat stand apart from its competition and probably led to more people using it because it was a one-stop shop.
Some laundromats can earn profits as high as 35% or more! These are usually high-volume operations in urban areas with lots of people living nearby and they tend to offer a wider range of services such as wash-and-fold or dry-cleaning.
Owning a laundromat can be a smart investment for some people because they can possibly have a stable flow of income.
However, you will want to keep in mind that success in this type of business still depends on careful planning, an understanding of your local market, and more. Not everyone will succeed, of course.
How To Find Laundromats For Sale
Jumping into the laundromat business begins with finding a laundromat business that is for sale, or starting your own business from the ground up.
If you are looking for a laundromat business that already exists and is for sale, here are some tips and strategies for locating a laundromat for sale.
Online platforms– Many websites list laundromat businesses for sale. Examples include BizBuySell and LoopNet. These platforms can be your first stop so that you can easily look at laundromat listings. I was able to find many laundromats for sale, ranging from around $100,000 to over $1,000,000. These sites will give you a lot of information too, such as the revenue, monthly rent that the laundromat pays, the year it was started, and some background on the business.
Broker assistance– There are commercial real estate brokers with experience in the industry that can be invaluable resources. These individuals often have connections and insights that you may not have as an individual buyer. You may want to search for commercial real estate brokers in your local area and see who can help you find a laundromat business for sale.
Local advertisements– Sometimes laundromats are listed for sale in your local newspaper. You can see if there is a business for sale section in your local paper to get started.
Important Things To Think About When Purchasing A Laundromat
When you come across a potential laundromat to buy, here are some things to think about:
Location– As mentioned in the earlier sections, the location of a laundromat plays a very important role in if the laundromat will be successful or not.
Condition of equipment– Commercial laundry machines are expensive. These are not the washer and dryers that you have in the home you live in. These are meant to take a lot of loads and be running nearly all the time. Due to this, you will want to inspect the machines thoroughly and, if possible, have a professional technician check them. This is because broken or old machines could result in costly repair or replacement costs.
Business finances– If you find a laundromat that you are interested in, then you should ask to see their financial records and carefully review them.
Lease agreement– Many laundromats do not own the building that they are doing business from. Due to this, you will want to look at the terms of the lease. A laundromat with a long-term lease allows for longer operations without the risk of eviction or a sudden rent increase.
Demographics and competition– As you read in an earlier section, knowing more about the demographics of the local area, as well as about your laundromat competition, is important too.
Remember to approach this process with patience. Investing in a profitable laundromat is a journey that requires careful planning, research, and due diligence.
Owning A Laundromat
Operating a laundromat is more than just collecting coins from machines. There are maintenance needs, customer concerns, and potential unexpected issues that you may come across.
Below, I take you through the typical day-to-day operations of a laundromat.
Day-to-Day Operations Of A Laundromat
Opening up– Regular, reliable hours are important in the laundromat industry. Therefore, opening up the store in the early morning is always a good idea as many people like to get their laundry done first thing. Plus, many of your customers will be repeat clients, so making sure that you open up at the same time each day is required.
Machine maintenance and cleanliness– When running a laundromat, you will need to check on the washers and dryers, perform required maintenance, and make sure that your business is clean. You will also want to make sure you are well-stocked with detergents and fabric softener.
Customer service– While the average laundromat only has 2 employees or less, you will want to have good customer service. After all, a happy customer is far more likely to return and recommend your services to others.
Financial management– Collecting payments and record-keeping is something that is done every single day.
Tips on Managing a Profitable Laundromat
Sell extra services– Successful laundromats tend to sell many more services other than just self-service laundry. Due to this, you may want to also try diversifying your income streams so that you can make more money from your laundromat. You can sell other services such as wash-and-fold services, dry-cleaning, dog washing stations, showers, or even have vending machines.
Maintain your machines– Regularly maintaining your washer and dryer machines minimizes downtime and expensive repair costs, so that your laundromat can run smoothly.
Promote your business– Word of mouth is so important in this type of business, but don’t shy away from using social media or local advertising to draw in potential customers.
Running a money-making laundromat is much more than keeping the machines running. It involves good customer service, finding more services to sell, and marketing your laundromat business.
Frequently Asked Questions About Laundromats
Here are common questions about owning a laundromat.
How much profit can you make from a laundromat? How much do laundromat business owners make?
The profits from laundromats vary depending on location, operation expenses, size of the laundromat, the amenities you sell, and more. The average laundromat business sees a profit margin of around 20% and 30%.
The national average income for self-serve laundromats ranges between $15,000 to $200,000 per year. As you can see, that is a wide range and that is because it just depends on so many different things.
What are the pros and cons of owning a laundromat?
Like with any business, there are positives and negatives. Owning a laundromat isn’t for everyone.
Owning a self-service laundromat can earn you money and can be a stable, low-risk investment with low operating costs. It can be a fairly passive income stream as well, as you don’t need many employees (the average laundromat has 2 or fewer employees). However, running a laundromat isn’t all easy, there are challenges such as high start-up costs, machines braking, and more.
The challenges of running a laundromat include that high-quality commercial laundry machines can be quite expensive and purchasing or leasing a location with enough space for machines and customers can be a significant portion of startup costs. Also, wear and tear is going to happen in a laundromat as machines get constant use, and the cost of repairing or replacing machines can add up.
Is owning a laundromat a smart investment? Is owning a laundromat worth it?
Owning a laundromat can be a smart investment, and it can be worth it for some people. But, it will cost you money.
It costs around $100,000 to $300,000 to start a laundromat. Starting or buying a laundromat can be high, but it can also earn you a steady income. But, that doesn’t mean that it’s a smart investment for everyone. There are many factors that go into running a successful laundromat.
How to find laundromats for sale?
You can find laundromats for sale through websites, commercial real estate agents, or business brokers. You can also network with existing laundromat owners or associations who can provide insights into potential sale opportunities.
Are laundromats a dying business?
The laundromat business has changed over the years, but they are still very much needed. People use laundry facilities all the time, including myself such as when I am traveling in my RV or boat. Everyone needs to wash their clothes.
There are ways to keep your business up to date, such as having a laundromat that accepts different methods (such as credit card and cash), having a drop-off service, and making your facility comfortable (such as with WI-FI, TV, beverages, etc.).
What are the key success factors for running a laundromat?
Successfully running a laundromat depends on many factors like the location, maintaining clean and well-functioning machines, providing good customer service, having amenities (such as air conditioning or head depending on the temperature, TVs, etc.), and more.
Are Laundromats Profitable? – Summary
I hope you enjoyed this article on whether buying a laundromat is a good investment or not.
Here’s a quick summary of what we learned above about this business venture:
Running a laundromat can be a way to make money, but it depends on many different factors.
Laundry businesses typically have low labor costs (they are fairly passive businesses with a lot amount of workers needed) and can be recession-proof.
Owning a laundromat does have cons and challenges, such as the fact that commercial laundry machines can be quite expensive if they need to be repaired or replaced.
There are many laundromats for sale and you can start your search online.
Running a successful laundromat business in today’s world will likely mean running a higher-quality business and selling amenities for additional fees.
In all, the profitability of owning a laundromat may make the challenges worth tackling. The average laundromat is changing and improving, and there can be room to make money with this small business.
So, what do you think? Are laundromats profitable? Are you interested in owning one?